Friday, May 25, 2012

Join Beacon Economics, MetroIntelligence Real Estate and Economic Advisors and the Graziadio School of Business and Management at Pepperdine University for the fourth annual 'What's Next LA?' economic forecast conference on the morning of Thursday, June 21st at the Los Angeles Airport Marriott.

The sections covering residential and commercial real estate have again been authored by MetroIntelligence Principal Patrick S. Duffy.
Click here to register.

This seminal annual event is presented in partnership with the Presidential and Key Executive MBA program at Pepperdine University and attended by hundreds of business and public sector leaders from across the Los Angeles region.
Come hear California's leading forecasters deliver new outlooks for the national, state, and local economies.

Why do views on the U.S. economy remain downbeat despite solid signs of recovery?

Gas and oil prices continue to climb. What is the breaking point for the U.S. economy?

Despite low expectations for growth, the Dow recently crossed 13,000. Sustainable or is another crash on the way?

Signs indicate that California's economy is on the upswing. Will the recovery outpace, or fall behind, the rest of the nation?

Following the forecast, engage with some of the state's foremost corporate leaders, venture capitalists, and education professionals about the real condition of California's business climate. The state's ability to retain its position as one of the world’s largest and most successful economies is facing heightened challenges; it is worth asking whether growth is truly being hampered or whether claims of an ‘unfriendly climate’ fail to hold up under scrutiny.

Do California businesses have access to the capital they need?

Is California truly over-regulated? Which rules most need to be changed?

How does the state’s tax system affect economic growth? Is the current system unfair? Unfriendly? Unbalanced?

What does the state’s neglected infrastructure and strained educational system imply for California's future?

The Housing Chronicles Blog would like to wish you and your families a very happy and safe Memorial Day
holiday weekend. As the unofficial start of summer, we know there will be lots
of local trips taken to the beach, to the mountains, or even to the backyard
BBQ. But this holiday is also a time of reflection, and one in which we honor
those who gave their lives so we’re able to continue our own in the United
States.

So just how did Memorial Day start and evolve?

Memorial Day, an American holiday observed on the last Monday of May, honors men and women who died while serving in the U.S. military. Originally known as Decoration Day, it originated in the years following the Civil War and became an official federal holiday in 1971. Many Americans observe Memorial Day by visiting cemeteries or memorials, holding family gatherings and participating in parades.

Early Observances of Memorial Day

The Civil War claimed more lives than any conflict in U.S. history, requiring the establishment of the country’s first national cemeteries. By the late 1860s Americans in various towns and cities had begun holding springtime tributes to these countless fallen soldiers, decorating their graves with flowers and reciting prayers.

It is unclear where exactly this tradition originated; numerous different communities may have independently initiated the memorial gatherings. Nevertheless, in 1966 the federal government declared Waterloo, New York, the official birthplace of Memorial Day. Waterloo—which had first celebrated the day on May 5, 1866—was chosen because it hosted an annual, community-wide event, during which businesses closed and residents decorated the graves of soldiers with flowers and flags.

Decoration Day

On May 5, 1862, General John A. Logan, leader of an organization for Northern Civil War veterans, called for a nationwide day of remembrance later that month. “The 30th of May, 1868, is designated for the purpose of strewing with flowers, or otherwise decorating the graves of comrades who died in defense of their country during the late rebellion, and whose bodies now lie in almost every city, village and hamlet churchyard in the land,” he proclaimed. The date of Decoration Day, as he called it, was chosen because it wasn’t the anniversary of any particular battle.

On the first Decoration Day, General James Garfield made a speech at Arlington National Cemetery, and 5,000 participants decorated the graves of the 20,000 Union and Confederate soldiers buried there. Many Northern states held similar commemorative events and reprised the tradition in subsequent years; by 1890 each one had made Decoration Day an official state holiday. Many Southern states, on the other hand, continued to honor their dead on separate days until after World War I.

Evolution of Memorial Day

Memorial Day, as Decoration Day gradually came to be known, originally honored only those lost while fighting in the Civil War. But during World War I the United States found itself embroiled in another major conflict, and the holiday evolved to commemorate American military personnel who died in all wars.

For decades, Memorial Day continued to be observed on May 30, the date Logan had selected for the first Decoration Day. But in 1968 Congress passed the Uniform Monday Holiday Act, which established Memorial Day as the last Monday in May in order to create a three-day weekend for federal employees; the change went into effect in 1971. The same law also declared Memorial Day a federal holiday.

Memorial Day Traditions

Cities and towns across the United States host Memorial Day parades each year, often incorporating military personnel and members of veterans’ organizations. Some of the largest parades take place in Chicago, New York and Washington, D.C. Americans also observe Memorial Day by visiting cemeteries and memorials. On a less somber note, many people throw parties and barbecues on the holiday, perhaps because it unofficially marks the beginning of summer.

Wednesday, May 23, 2012

After several years of false starts, there finally appear to
be more green shoots appearing in the nation’s housing market which indicate a
slow yet actual rebound. Sales of both
new and existing homes are on the mend, affordability is at generational highs,
and the dreaded tsunami of foreclosures expected to lower prices even further
have largely been bought up by investors to re-purpose as rental properties. Even better, according to Moody’s housing
analyst Celia Chen, homeowners will begin to favor newly built homes versus
distressed homes which are damaged.

Nonetheless, because the economy remains the top concern of
most voters in the 2012 Presidential election, how President Barack Obama and
the GOP’s presumptive nominee Mitt Romney influence housing policy is of
critical importance to homebuilders and homeowners alike. As a political Independent for well over a
decade, I may have no abiding loyalty towards either major party, but I do
certainly want what’s best for the industry and, by extension, the country.

According to the NAHB, the housing sector normally accounts
for 15% of the nation’s GDP, and is one of the few sectors which cannot be
out-sourced to other countries across the globe. Based on population growth and demographics,
the nation will have to build 17 million new residences just to keep up with
demand over the next decade, and yet for now the industry remains largely hamstrung
by deferred household formations, limited construction financing, and a flawed
appraisal system in which new homes erroneously get compared against deeply
discounted distressed and foreclosed units.

So can market forces alone help guide this all-important
sector of the U.S. economy to health, or will it continue to need more
help? The answer to that question
depends on whom you ask.

For Mitt Romney, while there is nothing on his campaign Web
site which specifically addresses housing, he seems to rely more on the private
market to sort things out. According to
Glenn Hubbard, an economic adviser to Romney, the domination of housing finance
by government entities such as the FHA, Freddie Mac and Fannie Mae is simply not
sustainable and must be phased out in favor of private lenders.

At a recent campaign event in Florida, Romney also
reportedly mused about getting rid of agencies such as the Department of
Housing and Urban Development (HUD) as part of his plans to simplify the
federal government. As for foreclosures,
he prefers to let the free market let prices hit ‘rock bottom’ as opposed to
government policies which would seek to make such declines more orderly.

President Obama, on the other hand, seems to believe that
continued intervention by the federal government – at least in the short to
medium run -- is essential to providing adequate mortgage capital and even to
help underwater borrowers refinance, with restrictions, to today’s historically
low rates. He probably doesn’t have much
choice: given that his previous attempts
to bolster the housing market haven’t worked at even close to the scale that is
necessary – with less than 20% of homeowners eligible for loan modifications --
if government intervention is to work at all, the policies must be more
aggressive.

More recently, Obama seems to have absorbed this criticism,
unveiling more than a half dozen plans to encourage refinancing, to reduce the
overhang of debts owed by underwater homeowners, and to expand existing aid
programs even to borrowers who were speculators or simply took on too much
debt. These latest moves seem as much
practical as they are political, since the previous obsession with refusing to
help those who made financial mistakes has really acted as a structural brake
on the economic rebound. Schadenfreude may feel good to the
individual, but it does nothing to fix the housing market.

Since the Obama Administration has put the housing market
back on its front burner, I’d expect the Romney campaign to do the same. But given that the federal government
continues to guarantee or insure more than 90% of all home mortgage activity
through FHA, Fannie Mae and Freddie Mac, candidate Romney will have to offer
specifics on just what, when and how the private sector will successfully step
up to the plate.

Tuesday, May 15, 2012

For this issue, entitled "Multi-Generational Housing Goes Mainstream," I wanted to discuss the emerging trend of building homes for multi-generational households. In recent months, the L.A. Times and Fox News have both interviewed me regarding this issue, so I thought this would be an opportune time to provide a more detailed analysis of what's going on. As part of this column, I also interviewed Adrian Foley, President of the Southern California division for Brookfield Homes.

An excerpt:

Over the last year, the concept of multi-generational
housing has been steadily gaining attention from the mainstream press, many of
whom have been focused on the NextGen line of new homes offered by Lennar.Lennar’s NextGen homes offer a ‘home within
a home,’ offering its own private living quarters suitable for everyone from
visiting in-laws or unemployed family members to unrelated tenants helping
chipping in for the mortgage payment.And yet Lennar is far from the only builder offering this concept, as
variations from builders including Taylor Morrison, The New Home Company and
even affordable housing providers such as Bridge Housing and Jamboree Housing
Corp. have been built.

Although once quite common, the trend of living with
relatives declined with the rise of the suburbs, but is now staging a comeback
due to economic conditions.For example,
the share of multi-generational households approached 25% in 1940 before
steadily dropping to just 12.1% by 1980.By 2010, however, that share had rebounded back to 18.3%, and, according
to a study by the Pew Research Center, is far higher for minority communities
in which family elders are readily welcomed as active members of the
household.In 2009, 25.8% of Asian households,
23.7% of black households and 23.4% of Hispanic households included multiple
generations versus just 13.1% for white households.It’s also much more common for foreign-born
households (24.6%) versus those born in the U.S. (15.6%).The highest percentage of these households by
age group included those 85 and older (21.5%), 25 to 34 (21.1%) and 55 to 64
(20.9%), which would point to the elderly as well as recent retirees and
boomerang children...